Canadian stability, law, a big magnet for investors

Canadian commercial-property investment is on track to break last year’s record, according to CBRE Group Inc., driven by demand for a haven from global instability and a quest for yield.

CBRE forecasts transactions topping $40 billion for 2017, up at least 15 per cent from last year’s record of $34.7 billion, the real estate services firm said in a statement. Transactions for the fourth quarter haven’t been accounted for yet, but investments for this year through September totalled $33.1 billion, almost matching all of 2016.

Real estate no longer looks like an alternative asset class, Peter Senst, president of Canadian capital markets for CBRE, said.

“When you look at relative returns, it stacks up very well against equities, infrastructure, bonds, so it’s becoming more of an acceptable strategy to pursue,” he said. “The deal sizes are getting bigger, the frequency and velocity for the deals getting out are becoming greater.”

Demand for commercial assets in Canada’s most populous cities, including Toronto and Vancouver, is sending prices soaring. The vacancy rates in these cities are among the lowest downtown office vacancy rates across North America.

Among the most active investors in Canadian commercial property are pension funds, so far accounting for 26 per cent of all transactions above $10 million, an 82 per cent increase from the same period in 2016, according to CBRE.

Foreign demand continues to soar for Canadian commercial investments, accounting for 15 per cent of all transactions above $10 million. One of the attractions for foreign investors is a soft Canadian dollar.

“There are a lot of reasons why groups want to come in — partly the dollar, partly the rule of law,” Senst said. “We look like a relative safe haven. We’re kind of like the Switzerland of North America.”